How millennial entrepreneurs are ruining the work ethic

Millennial entrepreneurs flush with cash are undermining the work ethic. That is a dangerous trend, says Matthew Lynn.

Hardly a day goes by without one whizzy technology company or another announcing it is trying out new ways of working, or experimenting with staff benefits. Last week Atom Bank, a techbased challenger to the traditional highstreet lenders, said it was pressing ahead with a four-day week, and that it was getting overwhelmed with applications. Other companies are experimenting with unlimited holiday time, or wellness classes. Or with a work-from-anywhere policy, allowing staff not just to work from home, but to travel around the world, logging into their laptops from a beach. Or indeed with sabbaticals, allowing people to regularly take six months or a year off before coming back to the office. The range of perks is expanding all the time. The old four weeks’ holiday and free lunch in the work canteen seems very modest by comparison.

Money instils discipline

There is of course nothing wrong with this in principle. It is good if staff are well treated. If people want to work more flexibly, either in the amount of time they spend at their desks, or even from whichever country they happen to be living in, then that is up to them and their employer.

Many tech companies, and start-ups in particular, are critically dependent on some very highly skilled individuals, especially in areas such as coding, marketing and design. They may well have to offer attractive packages to recruit the right people and retain them. The problem is that the most generous employers have one thing in common. It isn’t that they care more about their staff than other employers, or that the people in charge are more generous, caring people. It is that they don’t actually have to worry about making any money.

The inflation in perks increasingly comes from one sector – the venture-capital-backed start-ups. Take Atom Bank, which is leading the push for a four-day working week. It has raised more than £100m in fresh funding over the past year and reported a loss of more than £30m last year, although it says it is now profitable on an operating basis. Or take Revolut, another financial technology company, which has been making a splash by allowing staff to work from abroad for two months a year. It lost more than £200m last year, and although it is making progress towards profitability, it is not there yet.

Klarna, the buy-now-pay-later start-up, has a flexible work policy that allows its people to work from anywhere, but its valuation has fallen from $45bn to less than $7bn. The list goes on. The firms that have the most “progressive” employment policies are also the ones that have raised, and are often still raising, tons of money from investors. That risks undermining the work ethic. It is easy to prioritise wellness and work-life balance when you don’t have the grind of reporting quarterly profits to deal with and there is always another few hundred million pounds that can be raised in the next funding round. But it makes it increasingly hard for normal businesses – which, after all, do need to make money or go bust – to operate. A handful of highprofile companies are setting a standard and attracting headlines with generous benefits, but it is very hard for rivals to compete with that without damaging the bottom line.

Henry Ford didn’t WFH

Starting up a new business should be a passionate, all-consuming endeavour. It should be a 24/7 mission that is demanding on everyone’s time, but ultimately rewarding when it finally pays off. If staff have to be attracted, they can always be offered generous share options. But working four days a week from a beach while planning the next sabbatical doesn’t sound like the foundation for a great new business. That is not how Henry Ford built his car business, or how Steve Jobs or Bill Gates got started in the computer industry. And it is not how countless entrepreneurs for hundreds of years have managed to get an idea off the ground. The venture-capital industry should stop paying for all this – before it loses a ton of money on companies where people have forgotten what hard work is.

Recommended

3 emerging market dividend stocks to buy now
Share tips

3 emerging market dividend stocks to buy now

Professional investor Omar Negyal of the JPMorgan Global Emerging Markets Income Trust picks three of his favourite emerging market stocks for income …
4 Oct 2022
The MoneyWeek Podcast with John Mills: why a weak pound is good for the UK
UK Economy

The MoneyWeek Podcast with John Mills: why a weak pound is good for the UK

In a special bonus mini-podcast, Merryn talks to John Mills, founder of consumer goods distributor JML, chair of Vote Leave and one of the Labour Part…
3 Oct 2022
Kwasi Kwarteng U-turns on top tax rate decision
Budget

Kwasi Kwarteng U-turns on top tax rate decision

Kwasi Kwarteng has U-turned on his top tax rate reduction announced in his mini-Budget at the end of September.
3 Oct 2022
The best offers for switching banks – get up to £200 free cash
Personal finance

The best offers for switching banks – get up to £200 free cash

Looking to move bank accounts? You can now bag as much as £200 for switching current accounts
3 Oct 2022

Most Popular

Share tips of the week – 30 September
Share tips

Share tips of the week – 30 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
30 Sep 2022
Should you fix your mortgage? Here are the best rates available now
Mortgages

Should you fix your mortgage? Here are the best rates available now

Rising interest rates look set to spring a nasty surprise on millions of homeowners next year. You need to take steps today to protect yourself from a…
30 Sep 2022
Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022